Before we discuss why buying businesses in India is a smart move—whether you’re from the Subcontinent or not—here are some staggering facts to consider:
- India is now a country of 1.4 billion people and has surpassed China as the world’s most populous nation.
- According to Goldman Sachs, India will be the third-largest economy behind the U.S and China in the relatively near future.
- Eventually, India will have more purchasing power than the U.S.
- India is in the midst of a massive infrastructure improvement initiative: the number of roads, airports, and ports have doubled in recent years, and India has one of the largest rail networks in the world.
- India’s digital infrastructure is highly advanced, and currently boasts an intranet subscription rate of around 900 million people—nearly three times the entire population of the United States.
That’s just the tip of the iceberg. Yet, when it comes to desirable merger and acquisition business locations in the world, India is all-too-often far from top-of-mind considerations.
The time has come, however, for that to change.
Five Reasons why buying businesses in India can indeed be a smart investment.
According to Deloitte—despite the devastating impact of COVID—overall M&A deal activity in India has grown from 557 transactions in 2028 to 911 deals in 2022, a 53% uptick over a 5-year period.
Based on all indicators so far, it’s safe to say that buying businesses in India will not only continue to grow in coming years, but unless something happens to truly upset the world’s economy in the future, demand for M&A deals in India is very likely to skyrocket.
Here are five reasons why:
- Economic Growth
India has been experiencing steady economic growth for some time now, making it an attractive (if not ideal) market for business expansion and investment for medium-sized businesses, international companies. and global giants alike.
- Large Consumer Base
With the largest population in the world, India offers a vast consumer market with ample opportunities for companies to tap into a wide customer base.
- Young Workforce
India has a youthful and increasingly skilled workforce, offering a demographic dividend for companies looking for talent and human resources.
- IT Hub
India is also a global IT outsourcing hub, especially known for its software development and technology services. Acquiring companies in the IT sector can provide skilled professionals and technological expertise that isn’t readily available in many parts of the world.
- Strategic Location
And what it often one of its most overlooked benefits, India’s geographic location makes it a strategic gateway to both the Middle East and Asia. Its strategic location provides opportunities for companies to establish regional headquarters or expand their presence in neighboring markets that are often critical to international brands.
But there is much more. India has built its own 5G network, connecting millions of people with each other. The National Payments Corporation of India has also developed a Unified Payment Interface (UPI), which allows mobile devices to instantaneously transfer funds between two bank accounts.
UPI not only makes payments easier, faster and more cost effective, it literally has the ability to become a game-changer for a whole new generation of digital payment technology and payor preferences.
Although there are countless other reasons why buying businesses in India continues to gain momentum, perhaps the most important one is that India’s ascent on the international stage continues to move it closer and closer into the spotlight.
The IMF has identified the Indian rupee (INR) alongside China’s renminbi (RMB) as a potential international currency. In fact, a joint statement from the BRICS Ministers of Foreign Affairs and International Relations after a meeting of its foreign ministers on June 1, 2023 underscored the need for members to use their own currencies in lieu of the standard ones in international trade.
In short: the notion of the rupee as becoming a highly respected reserve currency isn’t a mere pipe dream. It actually may not be far off.
As far as the West’s perception of India, however, there may be some lingering bias that investing in India is the sole domain of the world’s leading organizations and brands. But nothing could be farther from the truth.
The same benefits that make buying businesses in India an attractive option for the world’s global giants still apply for small and medium-sized firms. India is ripe for M&A investment now, no matter what size the buyer or selling entity might be.
Pankaj Rungta is the Founder and Managing Partner of Rungta Advisors. Based in Pune, India, Rungta Advisors advises and executes private equity transactions across a broad range of industry sectors. He can be reached at pankaj@rungtaadvisors.com.
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